Application of Commonwealth of Massachusetts

• Citation: 206 F. Supp. 106
• Decision Date: 05 June 1962
• Docket Number: Civ. No. 56-29-M.
• Parties: Application of the COMMONWEALTH OF MASSACHUSETTS for Payment of Certain Funds Paid into the Registry of This Court and Thereafter Remitted to the Treasury of the United States Which Said Funds Represent Certain Unclaimed Monies to the Credit of the Bankruptcy Proceedings Listed in Schedule A of the Petition Which Bankruptcy Proceedings are in the Matter of the Petition the Respondents.
• Court: U.S. District Court — District of Massachusetts

206 F. Supp. 106

Application of the COMMONWEALTH OF MASSACHUSETTS for Payment of Certain Funds Paid into the Registry of This Court and Thereafter Remitted to the Treasury of the United States Which Said Funds Represent Certain Unclaimed Monies to the Credit of the Bankruptcy Proceedings Listed in Schedule A of the Petition Which Bankruptcy Proceedings are in the Matter of the Petition the Respondents.

Civ. No. 56-29-M.

United States District Court D. Massachusetts.

June 5, 1962.

Geo. Luftman, Leo J. Sontag, Vincent J. Celia, Boston, Mass., for plaintiff.

S. R. J. Suchecki, Asst. U. S. Atty., for defendant.

McCARTHY, Senior District Judge (Retired, by Designation).

This was an action brought by the Commonwealth of Massachusetts seeking a decree of this court in the form of an order directing the payment to the Commonwealth of undistributed bankruptcy dividends now held in the United States Treasury. This suit was instituted on July 5, 1956 by the Commissioner of Corporations and Taxation. The petitioner, the Commissioner of Corporations and Taxation, alleges that he is charged with the duty of enforcing the provisions of General Laws, Chapter 200A, Abandoned Property Law. Section 6 of Chapter 200A of said law provides as follows: "Monies paid into any court within this commonwealth for distribution, and the increments thereof, shall be presumed abandoned if not claimed within fourteen years after the date of payment into court, or as soon after the fourteen year period as all claims filed in connection with it have been disallowed or settled by the court." Section 7 of said law provides for the reporting and turning over of said property to the Commissioner of Corporations and Taxation on or before November 1 of each year.

The funds listed in petitioner's Schedule A, representing unclaimed moneys paid into the court for distribution, were deposited with the Clerk of Courts to the credit of bankruptcy proceedings. These monies have remained unclaimed for more than fourteen years after the date of payment into the court and all claims in connection with them have been disallowed or settled by the court and after five years from the date of payment into the court were, pursuant to the provisions of Section 2042 of Title 28 of the United States Code, remitted to the Treasury of the United States.

The petitioner asserts that it is the proper claimant of such monies and is entitled to payment thereof under the provisions of General Laws, Chapter 200A, together with whatever lawful interest may have accrued thereon and seeks an order from this Court that these funds be paid over to the Commonwealth of Massachusetts under Section 2042 of Title 28 of the United States Code. The parties have stipulated that all the foregoing facts are true with the exception of petitioner's claim to be the proper claimant.

The bankruptcy funds here in question were deposited pursuant to Section 66 of the Bankruptcy Act, 11 U.S.C.A. § 106, which provides:

"Unclaimed moneys

"a. Dividends or other moneys which remain unclaimed for sixty days after final dividend has been declared and distributed shall be paid by trustee into court of bankruptcy; and at same time trustee shall file with clerk list of names and post-office addresses, as far as known, of the persons entitled thereto, showing the respective amounts payable to them.

"b. Dividends remaining unclaimed for one year shall, under direction of the court, be distributed to creditors whose claims have been allowed but not paid in full, and after such claims have been paid in full balance shall be paid to bankrupt * * *."

This section of the Act was amended by the Act of August 1, 1956, c. 819, 70 Stat. 785, which repealed subdivision b of said Section and added the following sentence to Subdivision a: "Such moneys and dividends shall be deposited and withdrawn as provided in section 2042 of Title 28, and shall not be subject to escheat under the laws of any State." As noted above the State filed their petition on July 5, 1956 and the Bankruptcy Act was amended to prohibit escheats to the States on August 1, 1956.

The Massachusetts escheat statute is allegedly a self-executing escheat statute and it is the contention of the petitioner in its brief that the Massachusetts Abandoned Property Law has been held to be an effective escheat statute and that it should be considered as such by this Court. It further contends that no judicial decree is required to effectuate the escheat, but rather after fourteen years the property is presumed to be abandoned.

One of the most important questions to be determined in this case is the effect and scope of the Massachusetts Abandoned Property Law under which the petitioner is now claiming. In order for the petitioner to seek these funds under the provisions of the unamended Section 66 of the Bankruptcy Act an effective escheat to the Commonwealth must have been completed prior to the time of the amendment August 1, 1956. If a judicial decree by a State Court or other action is required on the part of the petitioner to perfect its claim, it would appear that the petitioner would be unable to claim application of a law which has been repealed, but must now act under the law as amended.

The power to escheat is an incident of the state's general authority over devolution and disposition of property within its jurisdiction and is properly exercisable by virtue of sovereignty over property owner or situs of property. Although unclaimed funds which have been deposited in the registry of the federal courts and in the federal Treasury are required to be in the name and to the credit of the United States under Section 2042 of Title 28 of the United States Code, the United States has no beneficial interest therein but holds the money as a statutory trustee for the rightful owners when and if they are determined. Moreover, a statute is always presumed to operate prospectively where there is not a clear expression in it to the contrary and such a prospective construction is more appropriate where it will eliminate a serious question of constitutional validity which arises if the statute were applied retroactively to order escheating such money...